Payment review and suspension of guarantees
The Rome Court’s de jure ruling of 27 August 2020 was different although the basis was the same as it focused on the application of the principles of fairness and good faith.
The rational and innovative ruling considered that:
- the economic crisis caused by the pandemic and the shuttering of business activities qualifies as a “supervening event in fact and law which triggers the requirement to renegotiate the contract; this is because, in the case of a commercial lease, the contract is drawn up assuming that a property will be used to carry out production activities”;
- despite the non-inclusion of renegotiation clauses in the contract, long-term contracts shall “continue to be complied with and applied by the parties as long as the conditions and assumptions valid when the contract was signed remain so”;
- when there is “a supervening event in fact and law that triggers the requirement to renegotiate the contract, such as the situation caused by the Covid-19 pandemic, the party disadvantaged by continuation of the contact at the originally agreed terms shall be allowed to renegotiate it in accordance with the general duty of objective good faith (or fairness) during performance of the contract (article 1375 of the Italian Civil Code)”;
- should the lessor refuse to renegotiate the contract in these new circumstances, “resort shall be made to equitable good faith to restore the contract to fair conditions”.
The Rome Court accepted the precautionary petition presented by the lessee, unable to make the lease payments due to the pandemic and related restrictive measures which obliged them to close their business, returning the contract to an equitable situation, amending it and ordering that:
- the lease payment be reduced by 40% for April and May 2020;
- the lease payment be reduced by 20% for the months from June 2020 to March 2021, giving due consideration to the decrease in the number of customer accesses allowed by law;
- the suspension of the surety provided as guarantee of payment unless the lessee’s outstanding lease liability exceeds €30,000.00.
This ruling will become a reference point and will be referred to frequently in defence briefs of the lawyers defending lessees of commercial or production properties.